Connect with us

Business News

LuLaRoe in $1B lawsuit for shady business model

(BUSINESS NEWS) LuLaRoe has landed in the middle of a $1 billion lawsuit with the basis being how the company is structured.

Published

on

lularoe

Multi-level marketing brands may be a quick way to make a buck for some people, but for others it may spell financial ruin.

On Monday, October 23rd, former distributors for multi-level marketing legging and athleisure brand LuLaRoe are filing suit against the company. These distributors, called “Retailers” by LuLaRoe, accuse the company of being a pyramid scheme, as defined by California law.

The 1 billion dollar suit federal class action suit, filed by three plaintiffs, seeks damages for incurring at least $20,000 dollars of debt upon its sales consultants. 80,000 of those consultants paid up front for their inventory. LuLaRoe denies all charges.

“We have not been served with the recent complaints, but from what we have seen in media reports, the allegations are baseless, factually inaccurate and misinformed,” a statement made by the company said, “We will vigorously defend against them and are confident we will prevail.”

In the brief attached to the filing, former retailers claimed that they were strongly encouraged to keep up to “$20,000 worth of inventory on hand” including “10 items in every size and style.”

The process of having new retailers consistently on the bottom of the company’s hierarchy, unable to reach higher levels and turn a profit is why the suit claims LuLaRoe’s status as a pyramid scheme.

Investigations into lawsuits of this sort are examined by the Federal Trade Commission (FTC). In a ruling in early last year, the FTC awarded damages of $200 million dollars to distributors participating in vitamin and supplement company Herbalife’s multi-level marketing business deals.

Essentially, the settlement for the 2016 Herbalife suit stated that there were two key standards for a multi-level marketing company that wants the all clear from the FTC.

First, consultants must get incentives from selling product to consumers, not just recruiting more sellers. Second, a multi-level marketer has to tell the truth about the return on investment that a consultant can receive selling the product.

According to the suit against LuLaRoe, the suit stated that one someone decided to become a consultant, “they were pressured to invest and reinvest by purchasing the Defendants’’ clothing products — regardless of whether they were able to sell the inventory.”

LuLaRoe also claimed that individual sellers could “earn full-time pay for part time work.”

In light of the suit, LuLaRoe’s website, which has subsections for “happiness,” “social responsibility,” and “making good” seems a little ironic now.

Alexandra Bohannon has a Master of Public Administration degree from University of Oklahoma with a concentration in public policy. She is currently based in Oklahoma City, working as a freelance filmmaker, writer, and podcaster. Alexandra loves playing Dungeons and Dragons and is a diehard Trekkie.

Continue Reading
Advertisement
1 Comment

1 Comment

  1. Pingback: LuLaRoe in $1B lawsuit for shady business model | FTC Guardian

Leave a Reply

Your email address will not be published. Required fields are marked *

Business News

Think LuLaRoe is a pyramid scheme? Founders say your opinion’s uneducated

(BUSINESS NEWS) LuLaRoe Founders fight back against allegations saying that they’re a disruptive business model, not a pyramid scheme, and anyone that disagrees is uneducated…

Published

on

lularoe

Clothing company LuLaRoe insists that they are not a “pyramid scheme” despite recent class-action lawsuits claiming that the company lured retailers into buying thousands of dollars’ worth of unsellable merchandise.

LuLaRoe uses “multi-level marketing” to sell their products, meaning that the company sells merchandise to “consultants” – most of them women working from home who resell the merchandise to their neighbors and friends at home parties. The idea is that moms who want to stay home with the kids will have an independent way of making an income.

Last month, two class-action lawsuit were filed against LuLaRoe, claiming that the company makes the vast majority of its profits off of women who sign up to be consultants, rather than from sales to the end-users.

Plaintiffs say they have lost thousands of dollars because LuLaRoe aggressively pushes consultants to buy up to $20,000 worth of merchandise that can’t sell, either because the markets is flooded, or because the products are poor – one suit claiming that the fabrics tear like “wet toilet paper.”

“The vast majority of consultants sitting at the bottom of defendants’ pyramid were and remain destined for failure and unable to turn any profit,” says one suit. “Some resulted in financial ruin due to pressure to max out credit cards and to take loans to purchase inventory.”

The suits further claim that when women have tried to get out of the business, LuLaRoe has refused to take back and refund unsold merchandise, while also telling former consultants that they can no longer sell the products. Thus, consultants are stuck with thousands of dollars of merchandise that they can’t sell sitting in their garages and basements.

Deanne and Mark Stidham, founders of LuLaRose, tell CBS that it isn’t a pyramid scheme and that anyone who thinks so has an “uneducated opinion.”

Says Deanne Stidham, “You get the product, you put it before people, and you sell it, and you have money, and that’s the simplicity of this business and that’s as easy as it can be.”

The Stidhams implied that jealous retailers were encouraging plaintiffs to sue because the LuLaRoe model has been “disruptive in the marketplace.”

Continue Reading

Business News

Class action lawsuit claims Tesla plant is a hotbed of racism

(BUSINESS NEWS) Tesla is being hit with another lawsuit, this time alleging discrimination at one of their plants. No wonder Musk wants to get to Mars…

Published

on

tesla autopilot

Groundbreaking automaker Tesla may be the future of automotive transportation, but when it comes to discrimination, some say the company seems to be living in the past.

This week, the company received notice that they would be brought to court by a group of black workers filing a class action lawsuit. The suit states that the Tesla’s Fremont, California production plant is a “hotbed of racist behavior.”

The suit was filed by former employee Marcus Vaughn in the California state court in Oakland and is the third lawsuit filed this year by black workers and former workers from Tesla.

Vaughn, who began working in the factory in April, says that his supervisors regularly referred to him using racial slurs. When he wrote a complaint to the human resources department, they were unresponsive. Then in October, Vaughn was fired for “not having a positive attitude.”

Tesla is denying the claims, saying that they did investigate the incidents, and fired three workers as a result. The company went so far as to post a statement called “Hotbed of Misinformation” on its website on Wednesday, saying that the company is “absolutely against any form of discrimination, harassment, or unfair treatment of any kind.”

In May, Musk sent an email to all employees telling them that should never “allow someone to feel excluded, uncomfortable or unfairly treated.” However, he also said that workers should “be thick-skinned.”

Vaughn’s lawyer, Lawrence Organ, who also sued Tesla on behalf of three black Tesla workers last month, responded that “The law doesn’t require you to have a thick skin. When you have a diverse workforce, you need to take steps to make sure everyone feels welcome in that workforce.”

Tesla is also facing lawsuits claiming that the company discriminates against gay and older workers, and last month, the United Auto Workers (UAW) union filed a complaint to the federal labor board, saying that Tesla had fired workers for supporting unionization.

Continue Reading

Business News

Harvard digs into how several women broke the glass ceiling

(BUSINESS NEWS) At an increasing pace, the glass ceiling is being shattered, but what did it ACTUALLY take for individual women to do just that?

Published

on

glass ceiling broken

More than ever, women are breaking the glass ceiling in businesses. However, progress is still very slow, with the number of women CEOs of Fortune 500 companies only increasing little by little each year.

The Rockefeller Foundations’ 100×25 initiative hopes to have 100 female CEOs of Fortune 1000 companies by 2025. To this end, they’ve given a grant to Korn Ferry, a recruiting firm, to find “research-based tools and strategies” for launching more women into executive positions.

Korn Ferry teamed up with Harvard Business Review researchers to interview and assess 57 female CEOs to find out the plot points and personality traits led to their business success. From these observations, they’ve made some crucial recommendations for how companies can get more women into top positions. Here’s what they discovered.

First of all, the study found that women had to work harder and longer to get to the top than men. They held more positions, worked for more companies, and were an average of four years older than their male counterparts.

Secondly, the study also found that female CEOs were motivated by different factors than male CEOs. They were less interested in status and rewards than they were in collaboration and in participating in something that would contribute positively to company culture or to the community as a whole.

The study also identified four common characteristics of female CEOs: courage, risk-taking, resilience, and managing ambiguity. Breaking the glass ceiling in and of itself required women to face fears, take on challenges, and stay in the fight even when discouraged.

Despite these powerful personality traits, female CEOs were found to be more humble than male CEOs. They spent less time promoting themselves and were more likely to be thankful for their coworkers and supporters, and to give credit to others for their successes or their company’s successes. Female CEOs saw themselves as a part of a team and understood that no single person was responsible for defining the company or making it successful.

The study discovered that very few female CEOs had envisioned themselves making it that far. Only five grew up dreaming of being a CEO, and two-thirds said that they didn’t even think about being a CEO until a mentor or boss encouraged them.

Lastly, the study found that female CEOs had strong backgrounds in STEM, as well as business, finance, and economics. None of the CEOs started their careers in human resources, a department that is often heavily staffed by women.

From these findings, the researchers made several suggestions to strengthen the “pipeline” of women into top positions. This included identifying women with potential earlier and giving them more opportunities and guidance, including mentors and sponsors. It also suggested describing leadership roles in terms that resonate with women by showing how the role will give them a chance to add value to the business and do something positive in the world.

Finally, the researchers warned to beware of the “glass cliff,” wherein women are only given leadership opportunities when the company is in crisis or when there is a high chance of failure. Instead, companies are encouraged to give women a chance when the brand is doing well, or if you must put them in a high-risk position, help them bounce back so that it doesn’t ruin their career.

Read more on the study at Harvard Business Review.

Continue Reading
Advertisement

The
American Genius
News neatly in your inbox

Join thousands of AG fans and SUBSCRIBE to get business and tech news updates, breaking stories, and MORE!

Emerging Stories